Zangerle v. Republic Steel Corp.

• Decision Date: 07 March 1945
• Docket Number: 30073.
• Parties: ZANGERLE, Auditor, et al. v. REPUBLIC STEEL CORPORATION et al.
• Court: Ohio Supreme Court

60 N.E.2d 170

144 Ohio St. 529

ZANGERLE, Auditor, et al. v. REPUBLIC STEEL CORPORATION et al.

No. 30073.

Supreme Court of Ohio

March 7, 1945

Syllabus by the Court.

1. Section 2 of Article XII of the state Constitution requires only lands and improvements thereon to be taxed by uniform rule according to value. By reason of the removal of previous constitutional limitations and restrictions, the power of the General Assembly to determine the subjects and methods of taxation and exemption of personal property therefrom is limited only by Article I of the Constitution of the state. State ex rel. Struble v. Davis et al., Tax Comm., 132 Ohio St. 555, 9 N.E.2d 684, approved and followed.

2. The term 'improvements' in the sentence found in Section 2 of Article XII of the Constitution reading 'Land and improvements thereon shall be taxed by uniform rule according to value' contemplates something which creates a permanent benefit to the land.

3. A fixture is an article which was a chattel but which by being physically annexed or affixed to the realty becomes accessory to it and part and parcel of it.

4. The united application of the following requisites forms the criterion of a fixture which may be considered an improvement to land: First, actual annexation to the realty, or something appurtenant thereto; second, appropriation to the use or purpose of that part of the realty with which it is connected; third, the intention of the party making the annexation to make the article a permanent accession to the freehold; this intention being inferred from the nature of the article affixed, the relation and situation of the party making the annexation, the structure and mode of annexation and the purpose or use for which the annexation has been made. Teaff v. Hewitt, 1 Ohio St. 511, 530, 59 Am.Dec. 634, approved and followed.

5. It requires a positive act on the part of the person making the annexation to change the nature and legal qualities of a chattel into those of a fixture. The intention to make an article a permanent accession to the realty must affirmatively and plainly appear; and if it be a matter left in doubt or uncertainty, the legal qualities of the article are not changed, and the article must be deemed a chattel. Teaff v. Hewitt, supra, 1 Ohio St. at page 533, 59 Am.Dec. 634, approved and followed.

6. Annexation, or the mode or extent of annexation, does not of itself create a fixture; but the want of annexation may prevent such creation.

7. The general principle to be kept in view in determining whether what was once a chattel has become a fixture is the distinction between the business which is carried on in or upon the premises, and the premises. The former is personal in its nature, and articles that are merely accessory to the business, and have been put on the premises for this purpose and not as accessions to the real estate, retain the personal character of the principal to which they belong and are subservient. But articles which have been annexed to the premises as accessory to it, whatever business may be carried on upon it, and not peculiarly for the benefit of a present business which may be of a temporary duration, become subservient to the realty and acquire and retain its legal character. Statement of Judge White in Fortman v. Geopper, 14 Ohio St. 558, 567, approved and followed.

8. The business of manufacturing is a pursuit personal in its character and not strictly subservient to real estate or essential to the enjoyment of the freehold or inheritance in land. Teaff v. Hewitt, supra, 1 Ohio St. at page 535, 59 Am.Dec. 634, approved and followed.

9. The action of an administrative board within the limits of the jurisdiction conferred by law is presumed, in the absence of proof to the contrary, to be valid and to have been done in good faith and in the exercise of sound judgment.

The appellee manufacturer is a corporation with its principal place of business in Cleveland and with plants in five counties of this state. Since October 1937, it has been operating a steel plant partly in Cleveland and partly in Cuyahoga Heights but all in Cuyahoga county. The property in question here constitutes a part of the processing machinery and equipment located in such plant. The plant consists of two units, the hot mill and cold mills.

The corporation is engaged in converting steel in the form of slabs into hot roll sheets and plates and cold roll finished sheets and strips. The items in question involve machinery and equipment of various sizes and various weights ranging from 750 pounds to almost 950 tons. They were designed to produce the above products and many of the items are directly related to each other to effect continuous operation. The machines of the production line are interconnected so as to insure a continuous flow of product. Most of the units, depending on their size, are supported by foundations which were specially designed therefor. These consist of concrete blocks, piers or bearing walls of varying mass, size and elevation. The foundation blocks, piers, and walls for the heavy equipment are generally built on concrete foundation mats which are supported by piling, while lighter equipment is supported by or rests on the floor. Practically all the machines are especially designed to produce the products of the mill and are not adapted for any other purpose. Some of the items are not attached to anything but simply rest on the floor. Some are not attached but are supported by members of a building--for instance, cranes. Some of the items are attached to other pieces of equipment which they serve. All the items that are attached, except certain ones (such as wiring), are bolted for the purpose of keeping them in place and preventing vibration incident to their operation. Most of the motors are mounted either on common beds or base plates on which the machines they serve are mounted, or are mounted individually, while some are mounted on gear drives used in connection with such machines. The bolts are of various diameters and lengths depending on the size and weight of the items and in all cases the bolts have removable nuts. All machines and motors are assembled at the manufacturer's plant and if they are not too large to meet shipping requirements they are shipped assembled as units to the corporation's plant. Others are disassembled sufficiently for shipping purposes and then reassembled at the corporation's plant. The parts of a machine that have to be disassembled are bolted together by bolts with removable nuts. All items that are attached, together with the bed plates, are removable without injury to the items or to the building. Most of the items are equipped with lugs so that after the nuts are unscrewed from the bolts they may be more easily lifted from the bolts and removed. When a plant is dismantled the bolts remain in the building. Items similar to those here involved have often been removed and sold. Some of the items in dispute have since been removed from the taxing district.

There is no cental light and power system, the power being purchased from The Cleveland Electric Illuminating Company. The machinery and equipment are generally driven individually. Motors are attached to other equipment or to base plates, which in turn are bolted to the foundation. Bed plates are used to facilitate dismantling and assembling and to keep motors in alignment when they are reassembled.

The testimony shows that the processing machinery and equipment are moved out of the building when an industrial property is sold, and the property is sold without such items excepting that sometimes the cranes may be rented or sold to the purchaser of the property, in which case an additional consideration is paid. Also, such items as cars, scales, switches, controls and oil or grease piping used in connection with processing material are always removed.

The property in dispute was assessed by the auditor of Cuyahoga county for the tax year 1938 at 75 per cent of the reported cost. The corporation has not disputed the value of the property as determined by the auditor but did complain to the board of revision of the classification as real property. The Board of Revision of Cuyahoga county, except in certain minor respects, denied the complaints of the corporation and treated the property in dispute as real property.

The corporation appealed to the Board of Tax Appeals where the matter was submitted by agreement of parties on a transcript of the record and evidence before the board of revision.

The Board of Tax Appeals held the property in question to be personal property and assessable as such. The auditor and board of revision appealed to this court under Section 5611-2 of the General Code.

Frank T. Cullitan, Pros. Atty., Saul S. Danaceau, and Walter T. Dunmore, all of Cleveland, for appellants.

Thomas F. Patton, Arthur J. Gentholts, Jones, Day, Cockley & Reavis, George H. Rudolph, and Earl W. LeFever, all of Cleveland, for appellee Republic Steel Corporation.

TURNER Judge.

The lawfulness or reasonableness of the decision of the Board of Tax Appeals depends upon whether the machinery and equipment in question, or any of it, constitutes an improvement on land within the contemplation of Section 2 of Article XII of the Constitution and Section 5388, General Code (115 Ohio Laws p. 564). There is no question as to the values placed upon the property assessed, the only question being its proper classification as personal property or land and improvements thereon. The plant is comparatively new, the property here in question having been placed upon the tax list and duplicate for the first time for the tax year 1938. The taxpayer returned all of the items in dispute as personal property and paid...